June Exports Down 10.9%, Declining for Four Consecutive Months (Comprehensive)

Ministry of Industry Export-Import Trends Announcement
Poor Performance Across Major Markets and Sectors

[Asia Economy Reporter Moon Chaeseok] Despite the impact of the novel coronavirus infection (COVID-19), some countries are lifting international economic lockdown measures. However, our exports showed a double-digit decline last month, marking the fourth consecutive month of decline.

According to the 'June Export-Import Trends' announced by the Ministry of Trade, Industry and Energy on the 1st, exports last month recorded $39.21 billion, down 10.9% compared to the same month last year. Since Memorial Day fell on a Saturday, the number of working days was 23.5 days, two days more than last year's 21.5 days. Adjusting for the increased number of working days, the average daily export amount was $1.669 billion, down 18.5% compared to the same period last year.

Imports amounted to $35.55 billion, down 11.4%. The trade balance showed a surplus of $3.67 billion, marking a positive balance for two consecutive months. The surplus expanded compared to $450 million in May.

The problem is that the overall export performance has shown a decline for four consecutive months: -0.2% in March, -24.3% in April, -23.7% in May, and -10.9% last month. Prior to this, during the global financial crisis in 2009, exports recorded -22.1% and -20.9% in July and August respectively, and for the first time in 11 years, exports recorded 'two consecutive months in the -20% range' in April and May.

Experts point out that the most serious issue is not only the continued decline but also the poor performance across major markets and industries. In particular, the performance of industries that the government is focusing on supporting, such as automobiles, auto parts, and petrochemicals, remains sluggish. Automobiles were down 33.2% and auto parts down 45% compared to the same period last year.

Although the government is providing liquidity support in this sector through financial institutions such as the Korea Trade Insurance Corporation, experts agree that overall investment sentiment has not recovered. Petrochemicals also recorded an 11.8% decline despite rising oil prices. On the 30th of last month (local time), the closing price of West Texas Intermediate (WTI) crude oil for August delivery on the New York Mercantile Exchange (NYMEX) was $39.27, nearly four times higher than the year's lowest price of $10.01.

To make matters worse, major market performances were also poor: the United States at -8.3%, the European Union (EU) at -17%, and the Association of Southeast Asian Nations (ASEAN) at -10.8%. Although the world is gradually lifting movement restrictions and lockdown measures due to the COVID-19 pandemic, no related improvement has been observed. The only exception was exports to China, which account for about a quarter of our exports, increasing by 9.5%.

Regarding this export performance, an official from the Ministry of Trade, Industry and Energy explained, "While the impact of COVID-19 continues, the export decline rate this month narrowed from the -20% range to the -10% range for the first time in three months," adding, "Although the export decline of major items remains, the decline in exports of items that were significantly sluggish last month has somewhat decreased."

Professor Kim Daejong of the Department of Business Administration at Sejong University commented, "It is not the time to be pleased that the export decline rate has narrowed; rather, we should be concerned that the overall performance is still negative despite China's nearly 10% increase," and added, "While the June performance is problematic, attention should be paid to whether the government can fundamentally improve the export structure through active reshoring policies such as corporate tax cuts and easing the 52-hour workweek in the global value chain (GVC) restructuring measures to be announced this month."